What is a cluster
According to Michael Porter, the originator of cluster theory, clusters are geographically concentrated groups of interconnected companies, specialized suppliers, service providers, firms in related industries as well as relevant institutions (for example, universities, standards agencies, trade associations) in specific areas that compete but at the same time collaborate.
There are many other definitions of a cluster nowadays. The most inclusive definition, in our opinion, is the following: «Clusters are a number of interconnected enterprises and individual entrepreneurs, specialized suppliers of goods and services, firms in related activities that are geographically localized, functionally dependent in the process of creating added value, and linked by contractual relations, who strive to ensure the growth of their own production efficiency and have common development goals „.
The main advantages of the cluster
Enterprises unite into clusters to obtain advantages, benefits. The main benefits of members of efficiently operating clusters are as follows.
Reduction of production costs of cluster members. This is achieved through the effective implementation of long-term contracts between cluster members, specialized suppliers of goods and services, firms in related activities, as well as scientific and innovative organizations. Such contracts ensure the sustainability of production activities of both the participants and the entire cluster.
The centralized execution of a number of common functions, optimization of the applied technologies and service systems also bolsters reduction of costs. This allows to achieve alignment in technologies, introduce innovations, and contribute to the growth of cluster member qualification.
The introduction of a common information and analytical system within the cluster allows to speed up information exchange between the participants, provides the cluster management, the core cluster, and key partners, in particular financial and credit institutions, with the necessary relevant information.
Finally, the territorial concentration of cluster members allows reducing transport and logistics costs.
Providing of competitive advantages for the cluster. The cluster can adopt consensual decisions on improving of quality and optimization of prices for goods and services of participants at the intermediate stages of production of the main cluster product. This makes it possible to achieve compliance of the participants' products with the agreed requirements in terms of price and quality, to ensure the competitiveness of the final cluster product.
Clusters adopt a long-term development strategy. This strategy coordinates actions implemented by the members to increase competitiveness, innovativeness, introduce modern production facilities and technologies within the cluster, and improve the qualifications of cluster members.
The cluster management makes it possible to take coordinated measures to optimize external and internal cluster relations, including those aimed at balancing the potential of the chain participants, and the continuity of the production chain. This helps to increase in the entire cluster performance.
The expansion of the role of the cluster in foreign and domestic markets, as part of the cluster development policy, is achieved through the increase of the cluster members’ export capacities, marketing enhancement, the cluster image improvement at the local and international level, the cluster promotion, PR and advertising. This allows the cluster members to reduce the functional risks and increase benefits due to the general financial contribution to certain measures for the creation and maintenance of common infrastructure, the expansion of the market share, i.e., to increase the synergistic effect (the overall result exceeds the sum of the combined individual effects).
Strengthening the comprehensive cooperation. This ensures an increase in the interconnections and cooperation of participants within the cluster, between the links of this cluster, with other clusters in the region and abroad, as well as the growth of cooperation with professional educational organizations, research institutes and development centers, etc.